The bright light in the bottled water category remains enhanced waters, which consumers looking for more than just refreshment are coming to appreciate.
That said, selling enhanced–or any other bottled waters in troubled economic times–means taking greater advantage of supplier programs and doing some savvy marketing and merchandising.
The year just passed was difficult on beverages particularly as customers began pinching pennies, said Gary Hemphill, senior vice president of information services for Beverage Marketing Corp. in New York City.
“It was a soft year, in particular for bottled water, because in addition to the economy and the environmental concerns during the first half of the year higher fuel and packaging costs were an issue,” Hemphill said. “That abated in the second half of the year and sales picked up.”
One leading bottled water manufacturer said growth has been particularly strong from sales of multi-packs.
“Multi-packs have boosted our overall ring,” said Angela Broski, marketing manager for six-unit RediGo Food Marts based in Painesville, Ohio. “We started carrying 24-packs about four years ago, and we have truly become a destination for the package.”
Many c-store operators are less than enthusiastic about take-home packages of bottled water in general, Broski said, but they’ve got a nice ring at $4.99 or $5.99, and a nice profit attached to it.
RediGo merchandises its 12- and 24-packs of bottled water together, in the back of the store just in front of the cold vault. It also allots a half or whole cooler door. Giving bottled water its own space is important, Broski said, because people who want it don’t want to have to look in six different places.
With overall consumer spending down, customers are spending a little more carefully.
“People are looking for healthy alternatives in the cold vault,” said Rick Rykal, retail operations specialist for CHS Inc., which markets under the Cenex brand. “It’s the same as anything else: if they eat a power bar that’s good for them, whether it’s got 500 calories in it or not, people are looking for an excuse to find something that they enjoy that they perceive to be healthy.”
There currently are 1,600 Cenex-branded retail operations in the U.S., including 800 convenience stores, most of which are operated by cooperatives and independent retailers.
The innovation, which consumers love, is “coming about primarily through what we call value-added, flavored and enhanced waters,” Hemphill said. “That is where the greatest growth was in the water beverages in 2008–with enhanced waters in particular. Flavored waters did not perform all that well, but among the enhanced waters—products like VitaminWater, Propel—products that tend to be flavored, sweetened and enhanced with vitamins or nutrients, there was strong growth.”
“Enhanced waters have really built up the category,” said Terry Messmer, merchandise manager for NOCO Express based in Tonawanda, N.Y. “I can see enhanced becoming our No. 1 SKU out of the cooler over the next few years. Off the top of my head five of our top drinks out of the cooler include three Poland Spring waters in the 20-ounce, one-liter and 24-ounce sizes.”
NOCO operates more than 30 stores in Western New York.
Messmer said the new buzz is the success of G2 last year (PepsiCo’s low-calorie electrolyte beverage), all of the (zero-calorie) Sobe waters and (Coca-Cola’s) VitaminWater all coming in with lower-calorie waters. “I think that’s the new infiltration, enhanced waters that have zero, or at least fewer, calories,” Messmer said, adding his stores carry 10 varieties of regular and enhanced waters in two cooler doors.
Over the course of the last year or so the multi-packs of water “have really started to take off,” Messmer said. “Having that value to offer every day is drawing people to our stores. At that point, we’re competing with the grocery stores and the other chains, at times having a hotter retail (price) than even they do on these products. The value is what the consumer is looking for.”
Noco price promotes water on a nearly monthly basis. In February, for example, it was offering Poland Spring 20-oz. bottles at two for $1. “We’ll go back and forth between the brand promotions,” Messmer said. “We also have an everyday take-home pack of three one-liter bottles, six- and 24-packs.” The 24-pack retails for $5.99, and $4.49 to $4.99 during promotions.
Getting the Word Out
Industry insiders agree that suppliers need to help retailers in their marketing efforts. While it is, of course, up to the retailer to decide which bottled waters they want to promote, there has been a focused effort by some on getting new distribution because it is a value offering.
Suppliers are working overtime to be sure their bottled waters are positioned and priced and promoted effectively, stressing value. Nestle Water, for example, is offering a value-priced take-home pack that retails for $3.99, and rolling out the first-ever ad campaign for Pure Life in the spring. The campaign is aimed at both the general and Hispanic markets and primarily targets female consumers.
“Promotions are extremely important to us especially on multi-packs,” said CHS’ Rykal. “On 12- and 24-packs, we’ve been able to hit different price points to keep up with the mass marketers, which has helped us drive some volume.”
CHS is also finding a lot of its growth in this category coming from its grocery wholesalers working with supplier companies like Nestle Waters to negotiate better prices. “In our part of the country, their brand is Ice Mountain. We’ve been working with Nestlé on a lot of different programs, including our upcoming summer promotions.”
Plus., Rykal participates in a buying a group in Wisconsin with 94 Cenex-branded stores, which also helps stores get favorable pricing. On average, the participating Cenex units carry 60 water SKUs, he said.
“Bottled water—and this is true of almost any product purchased in a convenience store—can be an impulse purchase,” Hemphill said. “Merchandising it near the checkout area is effective. I realize that space is a constraint in convenience stores, but paying attention to what your customers want in terms of package size and, in particular, the closure, can prove crucial.”
Health and wellness will continue to be a driving factor in consumer decisions for the foreseeable future, Hemphill suggested. “Bottled water and its derivative type products, like the value-added new products, fall very neatly within consumer demand for healthier refreshments,” he said. “The products are well positioned in that regard. It manifests itself in different ways, but that is the overriding trend that drives decision-making and beverage consumption today.”
For the months ahead, Hemphill predicted there are going to be some right spots and some not-so-bright spots. “Bottled water is probably going to fall into the middle somewhere, but it won’t perform quite as well as some of the other energy drinks,” he said. “Value-added waters are likely to be one of the brighter stars. That is probably where the greatest growth is going to come from.” CSD